Wal-Mart misses, sees tepid forecast

CHICAGO (CBS.MW) -- Shares of Wal-Mart Stores fell nearly 5 percent Thursday and acted as a drag on the retail sector after the retailer reported a profit that was short of Wall Street expectations and said consumers are still living paycheck to paycheck.

The shares finished the session at $55.52, down $2.44 after dropping to $55.40 earlier in the session.

Wal-Mart
WMT, -1.93%
a Dow Jones Industrials' component, said a turnaround at Sam's Club and strong international sales helped power profit growth of 12.7 percent for the third quarter, which ended Oct. 31.

The Bentonville, Ark.-based company earned $2.03 billion, or 46 cents a share, up from $1.8 billion, or 41 cents a share, in the same period a year ago. The results don't include McLane, the wholesale food distributor that Wal-Mart sold to Berkshire Hathaway earlier this year.

According to 26 analysts surveyed by Reuters Research, the company was expected to earn 47 cents per share. Estimates ranged from 46 cents to 54 cents.

In late September, Wal-Mart projected its per-share profit "at a midpoint" of 45 cents to 47 cents and warned analysts not to expect more than that.

In a recorded message, President Lee Scott admonished analysts for their projections. "It shouldn't have taken a calculator to come to the conclusion that 46 cents per share was the most likely outcome for the quarter," he said.

U.S. sales for stores open a year or longer -- an industry benchmark known as comparable-store sales -- increased 6.1 percent on a year-over-year basis. At the supercenter stores, same-store sales rose in a range of 7 percent to 9 percent on a near 25 percent jump in food sales.

Over the course of the quarter, Wal-Mart executives said on the call, sales growth slowed in September from August's robust pace and slowed again in October from September. The company blamed unseasonably warm weather.

"I don't think consumer spending is slowing," Scott said, "but I don't see the strength that many of you in the investment community appear to see.

"We're still seeing a cautious customer who is buying at opening price points and who is timing their expenditures around the receipts of their paychecks, indicating liquidity issues," he said. Opening price points are the absolute cheapest level at which a consumer can buy an item.

Scott said he expects that pattern to continue until the U.S. employment picture improves. Holiday sales are on track to top last year's, but Scott noted that the company is going up against weak comparisons from last year.

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